The Developed Economy Quandary – Declining Birthrates

Analysis

Declining birth rates will continue to be a major concern across developed nations, no less China and Macau. In an era where we are told that industrialised nations are using too many resources, and climate change will likely restrict the availability of arable land sufficient to feed growing populations, one would expect fewer people on the planet to be welcome news, but this is a trend that is of clear concern for policymakers. The new Chief Executive, Sam Hou Fai when on the election campaign trail even promised measures to support couples having more children, mainly to ease related financial burdens.

Headlines of the last couple of years say that Macau’s birth rate is “super low”. The numbers in 2022 at 6.4 per thousand were already the lowest in 23 years – that is 4,344 live births that year.  The number of babies born in Macau in 2023 dropped further by 3.2% to 3,712, being 5.5 per thousand. Early indications from Macau’s two hospitals gives us an even lower figure of 3,603 live births in 2024.

As Reuters reported a year ago, 2022 was the first year in six decades that China’s population moved into decline,  a trend which continued into 2023. The birth rate in China stood at 6.7 per thousand in 2022, dropping to 6.6 per thousand in 2023. 

These figures compare with other developed nations that have been struggling to deal with this problem for a number of years: in 2022 Japan sat at 6.3 per thousand, South Korea at 4.9 where pro-natalist policies do not appear to be working.

Commentary on low birth rates suggest “severe consequences for the economic future”. One concern of a lower birth rate is there are fewer young, working-age people to generate income and provide ongoing social care to support the elderly and infirm. Fewer babies also slows economic growth, which also deters having more babies. This vicious cycle towards a lack-lustre economy is of further concern because of economic wisdom that national income “correlates with every indicator of human flourishing” (Stephen Pinker), and few policymakers would risk testing to see if the relationship was causative.

In general, birth rates decline in developed countries, not due to mortality rates as seen in developing countries but due to personal choice and decreasing fertility rates as couples defer having children, or other factors such as obesity and urban lifestyles leading to subfertility. Birth control availability and the deterrent of high financial costs of housing and educating children both mean that the timing and choice to have children is almost entirely driven by individuals. Higher levels of education for woman and changing norms in business and leadership roles have given woman access to careers outside the home. Having children now comes at a higher cost: to wealth, freedom, career progression and female status. The benefits from working and having careers, along with the disadvantages of having children has resulted in a larger proportion of couples deciding not to start their families until later, if at all.

In addition to the general trends, there are a number of causes specific to the Chinese context: the end of the lockdowns late 2022 saw a spike in Covid deaths concentrated in 2023. The One Child policy not only reduced the population size but also changed family norms and values towards smaller family sizes. The inevitable outcome of this is there are lower levels of informal childcare and maternal support available from these smaller family units – no uncles or aunts, cousins or siblings to help with the new child. The economic downturn and difficulty finding work, together with the cost of childcare has meant parenting has become a high-stakes endeavour that often requires the mother to sacrifice career opportunities. The drop in marriages also removes a pre-requisite. Career success and financial independence has become a valid alternative for many urban woman.

For Macau, as reported in MDT last week, the Chinese Youth Advancement Association survey found that only 38% of the young people in Macau aged 18-35 surveyed said they were willing to have children. The disinterest stemmed mainly from economic factors and other social pressures. It was reported that more comprehensive childcare support, maternity leave and government financial support might encourage more couples to have children

Other solutions recommended for Macau were to improve the culture of marriage and having children. Last week the Women’s General Association called for an integrated and multi-pronged approach by the Macau government covering marriage, childcare, housing and support for businesses to provide family-friendly benefits.

Proposed policies to address declining birth rates in developed countries.

These ideas for Macau follow conventional solutions to declining birth rates which include financial incentives and bonuses, government housing and childcare assistance, family planning and fertility education, Assisted Reproductive Technologies, parental leave, and support for employers to provide family-friendly workplaces. The European Human Rights Act notes human reproduction needs to take into account societal, economic, population level, immigration, employment education, health, wealth and family life in complex interactions (note figure).

Chinese mainland solutions also include Government incentives such as cash bonuses, housing subsidies, tax deductions, longer maternity leave and free fertility treatments, with the addition of social pressure for women to return to family-making for the good of society and national development. After 3.5 decades of being told having children was a burden on society, it takes a profound shift to move social norms and values.

The current regional solutions aim to incentivise a change in behaviour while still maintaining focus on continued economic growth and sustaining an aging population. So, while money, power and status continue as individual aspirations, someone is asked to sacrifice something for the good of society. The spectre of responsibility for raising children in an urban nuclear family looms even larger, especially when personal family support systems are minimal due to small family sizes or urban migration.

There are alternative solutions, some used elsewhere and others unthinkable: in Macau it may be worthwhile legislating protection for part-time career options and job-sharing with broader acceptance of working from home. The use of terms such as “parental leave” and legislating access for both parents both increases the normative acceptance of businesses supporting fathers as active carers, and eases the return to work by mothers. Immigration has been used in countries like the U.K. and Australia to delay the shrinking population pain. Tyrannical options would include removing the right to abortion and access to contraception.

Policymakers seem to view the problem of reproductive behaviour as caused by a set of lifestyle choices in the pursuit of individual wealth and freedom as end goals. This is why economic incentives are the leading mechanisms promoted to communities to reduce the sacrifices couples must make to have children.

A study published in Proceedings of the Royal Society B takes a different view of the causes from which an alternative set of solutions can be proposed. The study speaks of the Demographic Economic Paradox that notes that in successful market economies, rising wealth and education together with access to contraception deters people from having large families because in that context women are driven by status rather than reproduction: “reproductive behaviour is shaped by a woman’s access to resources and economic opportunity.”

If status is the main driver of reproductive activity in a society, and if wealth, career progression and material success offer status, then activities that lead to those outcomes will be the choice of individuals in developed nations. It makes sense that highly educated women who have access to good jobs will pursue career opportunities, especially in an environment where time, money, and status would be sacrificed if one elects to use one’s womb in the service of the economic health of the nation without recompense. Of course, most of us willingly accept tradeoffs for the benefits of hearth and home, but is moulding everyone to conform to such normative behaviours effective?

Digging deeper, the pursuit of wealth and status are, however, means to further ends: money allows us to acquire what we need for well-being (housing, health, etc), work gives us purpose, and status gives us social respect. Instead of having to choose between one or the other with government support and forms of cost sharing to ease the pain of sacrifice, the pursuit of well-being, purpose and social respect may be gained via routes that include the family. In public life we cue what we value: Should children be hidden from the public eye, spend long days at childcare, or looked after by domestic help while parents chase the golden orbs of freedom and financial prosperity, few benefit from family life but the economy. If family life is valued publicly and a visible part of our everyday lives, with labour laws specifically created to elevate the status of families, and even a toddler tolerant community, then we might have a fighting chance.

Messaging is also critical: When leadership encourages a population to contribute to the conventional economy, to increase economic output and nudge financial success indicators forever upwards, we note a deterioration in family values as individuals strive for the material goods that prove to those around them that they are valued members of an economic network. Afterall, this is where we are told status is to be found; through the ownership of homes, nice cars, material abundance and the ability to travel and enjoy quality leisure activities.

Oxford University anthropologist, Alexandra Alvergne, suggests that status and family size depends much on context. Shifting values to create a context in which family size confers status may drive reproductive behaviours to rewrite the theory of the Demographic Economic Paradox. This, however, is only likely to occur when society as a whole encourages greater role equity so that all parents have the option to work and rely on spousal, family, employer, government and social support to undertake both parental and work roles with pride and without prejudice. The current option attempts to cajole many woman of child-bearing age to sacrifice other roles they personally deem meaningful. Such a policy undertaking has not been successful elsewhere.

Postscript: One option less readily voiced is to prepare economies to adapt to shrinking populations, and to become agnostic about economic growth and even the causal link between an increasing birth-rate and economic sustainability. By Leanda Lee, MDT